If you want to go DSLR, I've been very happy with my Nikon D50. It was just recently dropped from the Nikon line up after the D40x was introduced, so you should be able to find D50 kits for right around $500. One thing to keep in mind though is that you will be pretty limited on your zoom range with the kit lens so you may want to budget for another lens or 2.

If you're not quite ready for SLR, my Dad just got the new Olympus 550uz and has been very happy with it. One down side I noticed with it though is if you use auto modes for low light shots or get into the digital zoom range, there is A LOT of noise. You mentioned the S3 IS. While I've never tried this camera, it has gotten great reviews. To see what this camera is capable of, look no further than davidis' gallery: http://gallery.photographyreview.com...&ppuser=236373